|
Point of Difference
|
Ind AS
|
ICDS
|
|
Ind AS 1 vs. ICDS I
|
|
Changes in accounting policies –
accounting of the impact
|
Change in accounting policy allowed only
when required by an Ind AS or results in more reliable and relevant
information. Requires retrospective application of changes in accounting
policies.
|
Change in accounting policy allowed only
when there is reasonable cause. ICDS does not provide any guidance on how to
account for the impact. Impact of change generally debited or credited to
current P&L.
|
|
Correction of prior period errors
|
Requires correction to be made for the
retrospective period.
|
Correction is made for the relevant
period, and previously filed ITR’s are revised.
|
|
Change in Mark to markup losses / gain
|
MTM loss/gain on derivative is
recognised in P&L unless designated as hedge.
|
Losses shall not be recognised unless
recognition is in accordance with provision of other ICDS. Instances of
losses permitted under ICDS are;
|
|
|
|
??Inventory valuation loss
|
|
|
|
???Loss on construction contract on POCM basis
|
|
|
|
??MTM forex loss on monetary item (include forward and option
for hedging)
|
|
|
|
??Provision for liability on reasonable certainty basis
|
|
|
|
Losses which may not be allowed as
deduction are as given below;
|
|
|
|
??Foreseeable loss on construction contract
|
|
|
|
??MTM on derivative (for example, commodity contracts) other
than forward and option for hedging covered by ICDS VI
|
|
|
|
CBDT FAQ dt 23rd March, 2017
clarified that same principle will apply to MTM gain as well.
|
|
Ind AS 2 vs.
ICDS II
|
|
Change in cost formula
|
Considered as change in an accounting
policy
|
Cannot be changed without reasonable
cause.
|
|
Inclusion of statutory levies in value
of inventory
|
Inventory to be valued net of creditable
statutory levies (like GST)
|
Inventory to be valued inclusive of
creditable statutory levies (like GST).
However, this is just a matter of semantics, and the net profit as per
ICDS and Ind AS on this account will not be different.
|
|
Ind AS 115
vs. ICDS III and ICDS IV
|
|
Scope
|
Ind AS 115 deals with revenue arising
from contract with customers
|
ICDS III (Construction Contracts) and
ICDS IV (Revenue) are similar to erstwhile Indian GAAP AS 7 and AS 9.
|
|
Revenue recognition principle
|
Revenue is recognised based on five step
model on transfer of control to customer
|
For goods, revenue is recognised on
transfer of risk and rewards. For services, revenue is recognised to the
extent of stage of completion of contract
|
|
Identification of performance obligation
|
Detail requirements apply for
identifying and recognising revenue on multiple-element contracts
|
Do not require or prohibit
identification of performance obligation.
|
|
Allocation of transaction price
|
Allocated to performance obligation
identified based on relative standalone selling price.
|
Not covered in ICDS
|
|
Variable consideration
|
Methodology for estimating and
recognising variable consideration is set out in detail in the standard.
|
Currently, entities may defer measurement
of variable consideration until uncertainty is removed. For e.g. claims in
construction contracts are recognised on final certainty.
|
|
Sales return
|
Revenue is recognised after deducting
estimated return. Sales returns result in variable consideration.
|
No guidance is provided in ICDS
|
|
Significant financing
|
Revenue is adjusted for significant
financing and presented separately as finance cost/income
|
Revenue is not adjusted for time value
of money
|
|
Non-cash consideration
|
Measured at fair value
|
No guidance provided
|
|
Onerous contract
|
Expected losses are recognised as an
expense immediately.
|
Losses incurred on a contract will be
allowed only in proportion to the stage of completion
|
|
Real estate revenue
|
If the entity has a right to receive
payment for work completed to date, POCM is applied. Else completed contract
method needs to be followed.
|
Exposure draft issued. Requires POCM.
|
|
Early stage contract
|
Revenue recognised to the extent of cost
if there is no reasonable certainty.
|
Reasonable certainty threshold of 25% is
specified.
Revenue is recognised to the extent of
costs incurred when up to 25% of the work is completed otherwise
proportionate method will apply.
|
|
Service contract
|
Revenue is recognised on transfer of
control.
|
POCM applied. Straight-line method, if
service contract involves indeterminate number of acts over specific period
of time.
Completed contract, if duration < 90
days
|
|
Retention money
|
Retention monies are a deduction from
the revenue bill, which is paid by the customer on satisfactory completion of
contract or warranty period. The retention monies are treated as normal
revenue.
|
Same as Ind AS. Retention is part of
overall contract revenue and is recognised subject to reasonable certainty of
its ultimate collection.
|
|
Ind AS 16 vs. ICDS V
|
|
Major spare parts
|
Recognised as Inventory if do not meet
Ind AS 16 criteria. As per Ind AS 16 property plant and equipment are items
that;
??Are held for use in production or supply of good, and
??Are expected to be used during more than
one period.
|
Machinery spares which can be used only
in connection with a Tangible fixed asset and where use is irregular, have to
be capitalised.
E.g., Spares which can be used with
multiple machine will be considered as inventory under ICDS whereas these
will be capitalised and depreciated in Ind AS.
|
|
Major inspections
|
They are capitalised. Remaining amount
from previous inspection is derecognised.
|
No guidance.
|
|
Ind AS 21 vs. ICDS VI
|
|
Foreign currency
|
Functional currency is currency of
primary economic environment in which company operated. Foreign currency is
currency other than functional currency.
|
Reporting currency is INR except for
foreign operation. Foreign currency is currency other than reporting
currency.
|
|
Scope exception
|
Foreign exchange gain/loss regarded as
adjustment to interest cost is scoped out.
The adjustment is considered as
borrowing cost under
Ind AS.
|
No such scope exclusion.
|
|
Capitalisation of exchange differences
on long term foreign currency monetary item for acquisition of fixed assets
|
Exchange difference is debited/credited
to P&L
|
? On imported assets S43A allows capitalisation
??With respect to local assets all MTM exchange differences are
included in taxable income
|
|
Forward exchange contracts on balance
sheet items, such as forward contract for debtor or creditor
|
Derivatives are measured at fair value
through P&L, if hedge accounting is not applied.
|
Any premium or discount shall be amortised
as expense or income over the life of the contract. Exchange difference on
such a contract shall be recognised as expense/income in the period in which
the exchange rate changes.
|
|
Forward exchange contract to hedge
foreign exchange risk of firm commitment or highly probable forecast
transaction
|
Derivatives are measured at fair value
through P&L, if hedge accounting is not applied.
|
Section 43AA introduced by Finance Act
2018 requires exchange differences on forward exchange contracts to be
recognised as per ICDS. Premium, discount or exchange difference, shall be
recognised at the time of settlement as per ICDS VI.
|
|
Foreign exchange contract for trading or
speculative purposes
|
Derivatives are measured at fair value
through P&L
|
Section 43AA introduced by Finance Act
2018 requires exchange differences on forward exchange contracts to be
recognised as per ICDS. Premium, discount or exchange difference, shall be
recognised at the time of settlement as per ICDS VI.
|
|
Foreign currency translation reserve
(FCTR)
|
Accumulated in reserves. Recognised in
P&L on disposal, deemed disposal or closure of branch.
|
FCTR taxed similar to FX
assets/liabilities; ie, monetary items are restated at closing exchange rates
but non-monetary items are stated at historical rates. FCTR balance (excludes
impact on non-monetary items) as on 1 April, 2016 shall be recognised in the
previous year relevant to assessment year 2017-18 to the extent not
recognised in the income computation in the past.
|
|
Ind AS 20
vs. ICDS VII
|
|
Government Grant – recognition
|
Not recognised unless there is a
reasonable assurance that the entity shall comply with the conditions
attached to them and the grants will be received.
Mere receipt of grant is not criteria of
recognition.
|
Similar to Ind AS, except recognition is
not postponed beyond the date of actual receipt.
|
|
Ind AS 20
vs. ICDS VII
|
|
Export Incentive
|
When it is reasonably certain that all conditions
will be fulfilled and the collection is probable.
|
In the year in which reasonable
certainty of its realisation is achieved.
|
|
Grant in the nature of promoters
contribution
|
No such concept.
|
No such concept.
|
|
Sales tax deferral benefit
|
Grant benefit imputed based on time
value of money. Benefit capitalised, if related to acquisition of asset. Else
credited to P&L.
|
No benefit imputed
|
|
Ind AS 109 /
ICDS VIII
|
|
Securities (quoted) – held for trading
|
Mark to market gain/loss recognised in
the P&L
|
Lower or cost or NRV to be carried out
category-wise.
Securities held by banks and Public
Financial Institutions to be valued as per extant RBI Guidelines.
|
|
Ind AS 23
vs. ICDS IX
|
|
Qualifying asset
|
Assets which takes substantial period of
time to get ready for its intended use.
|
No condition w.r.t substantial period of
time except inventory ( 12 months).
|
|
Capitalisation of general borrowing cost
|
Weighted average cost of borrowing is
applied on funds that are borrowed generally and used for obtaining a
qualifying assets.
|
Allocation is based on average cost of
qualifying asset to average total assets.
|
|
Borrowings – Income on temporary
investments
|
Reduced from the borrowing costs
eligible for capitalisation
|
Not to be reduced from the borrowing
costs eligible for capitalisation.
|
|
Commencement of capitalisation
|
Capitalisation of borrowing cost
commences, when the construction activity commences.
|
In case of specific borrowings, from the
date on which funds were borrowed. In case of general borrowings, from the
date on which funds were utilised.
|
|
Suspension of capitalisation
|
Capitalisation of borrowing cost
suspended during extended period in which active development is interrupted.
|
No guidance.
|
|
Ind AS 37
vs. ICDS X
|
|
Recognition of contingent assets
/reimbursement
|
Virtual certainty is required for
recognition.
|
Reasonable certainty is required for
recognition. Test of ‘reasonable certainty’ is not in accordance with section
4/5 of Income-tax Act. Hypothetical income not creating enforceable right
can’t be taxed.
|
|
Discounting of long term provision
|
Required
|
Not allowed.
|
